Hainan Free Trade Port vs Free Trade Zone

A pilot free trade zone is a defined area, typically around 120 square kilometres inside a host city, used to test investment and trade reforms while remaining inside China's ordinary customs territory. The Hainan Free Trade Port covers an entire province of about 35,400 square kilometres, has its own national statute passed in 2021, and since 18 December 2025 the whole island operates as a special customs supervision area.

Closure, or 封关, means the whole island was placed inside a customs supervision perimeter on 18 December 2025, operating on the principle of "first line open, second line controlled, free movement within the island". Goods from overseas enter Hainan with liberalised treatment, while movement from Hainan into the rest of mainland China is supervised as an import.

No. Closure applies to customs treatment of goods, not to people. Travel between Hainan and the rest of China continues as normal, and the change does not restrict access to the island.

No, but coverage is now broad. Closure replaced the former positive lists of roughly 1,900 zero-tariff tariff lines with a negative-list approach: goods outside the taxable-goods catalogue are exempt from import duty, import VAT and consumption tax. That covers more than 6,600 tariff lines, around 74% of categories. Treatment still depends on the goods, the importer's eligibility and the customs procedure used.

Under the processing value-added rule, goods produced by an encouraged-industry enterprise in Hainan using imported inputs may enter the rest of mainland China free of import duty where processing in Hainan adds at least 30% of value. Import VAT and consumption tax are still payable. The policy has operated since July 2021 and now applies across the island.

No. The company must be registered in Hainan, carry out substantive operations there, and have its main business within the Catalogue of Encouraged Industries for the Hainan Free Trade Port. The incentive was introduced by Caishui [2020] No. 31 and extended to 31 December 2027 by Caishui [2025] No. 3.

More than a registered address and a licence. The assessment considers whether the company's actual production and business operations, personnel, financial accounts and assets are based in Hainan. It is worth planning where management sits, where staff work and where books are kept before registration rather than after the first tax filing.

Yes, for qualifying high-end and urgently needed talent working in the Hainan Free Trade Port, the individual income tax burden is capped at 15%, against a national progressive scale reaching 45%. Eligibility rests on the individual meeting Hainan's talent criteria and genuinely living and working there, not on the employer's registration alone.

Usually not. Most customs benefits attach to goods that are imported, processed or traded. A consulting or software business will rarely use them, so the decision should rest on customers, staff, licensing and whether the corporate income tax conditions can genuinely be met.

Yes. A Hainan company is registered under the same national company law as any other Chinese company and can contract and invoice across the country. What changes is the customs treatment when physical goods move from Hainan into the mainland across the second line.

Hainan applies its own shorter foreign-investment negative list alongside the national one, and the Regulations on Foreign Investment in the Hainan FTP, effective 30 July 2025, opened further sectors including certain mining, value-added telecoms, healthcare and education activities. Whether your specific activity is open still needs to be checked against both lists.